Traditionally, debt settlement was a strategy used by some consumer credit counseling agencies as a last-ditch effort to get a household's finances back on track. Partnerships with sponsoring credit card companies ensured that participants could get the education necessary to form effective budgets while rebuilding their credit. However, having endured the effects of a recession, some Americans have found themselves willing to try anything to cut their credit card bills in half or more.
Debt settlement typically involves negotiating with a credit card company willing to accept a portion of an outstanding balance in exchange for a portion of the amount due. Credit card issuers might prefer to receive half of a balance, for example, instead of waiting for the account to default. Because this strategy can be devastating to consumer credit reports, personal finance experts often recommend dealing with a credit card company's remediation department.
About the Author
Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.